Education Industry in 2012 at a Glance
The educational services market is large and growing with several types of opportunities available for franchisees. As of 2008, there were approximately 58,113 establishments in the industry which earned a combined $19.4 billion dollars in revenue. The industry is largely fragmented – the fifty largest companies represent just 30% of the total revenue in the industry. In 2006, there were 55.1 million students attending school in grades K-12, all of whom are potential clients for educational services – and that number is expected to increase to 74 million by 2015. However, an education franchise isn’t just limited to tutoring young people in traditional school subjects like math and science – education franchises extend from traditional school subjects like math and science, to child care and early education programs, to classes for all ages in career education, art, dance or even driving.
Industry Overview
The vast majority of revenue in this industry comes from tuition or program fees. Gross profits tend to range from 60-90% depending on the location and particular course, and net profit averages out to between 2-10%. Increasing company size has helped consolidate operations in the educational services field – helping to lower fixed costs and improve overall operational efficiency, both of which are very important to keeping businesses in the field healthy and profitable. Finding qualified instructors in any field is becoming increasingly challenging; it is important to inquire about this when researching potential franchises. There is a potential danger to some areas of the field in future competition from online training courses, which are growing more and more popular as technology spreads – although currently most online courses are geared towards ungraduate education, many expect the field to broaden as effective programs in other areas are developed for the internet. In addition, businesses face competition from free online resources and computer software. Overall, however, the field is expanding – educational services in the United States are forecast to grow by 5% per year over the next five years. The growth is largely attributed to the growing global competitive landscape and the emphasis on higher education in the U.S. as more and more blue collar work is being shipped overseas.
Tutoring and Child Education
Tutoring is a popular franchise option, either based out of the home or at an on-site location. Tutoring in the United States is a $4 billion dollar industry. The home-based model employs the franchisee as a broker who acts as an intermediary between educators and teachers, who provide tutoring, and students, who receive instruction in any number of subjects. Examples of this model include Club Z Tutoring and Creative. Because of this role, franchisees don’t need to have prior experience in education. The on-site location based model involves the franchisee having a center at which kids come to be tutored or take classes, learning math, writing and other subjects as well as standardized test preparation – two franchises with this model are Kumon and Huntington Learning Center. The disadvantage of this model relative to the home-based model is that, because it requires real estate, it is more expensive to start.
Some franchises are geared towards younger children and provide a combination of child care and education. There are about 53,000 for profit childcare facilities with a combined revenue of about $18 billion per year, and 21,000 additional non-profit facilities which bring in $12 billion per year. About 12 million children under the age of six were enrolled in child care as of August 2009. Child care is a growing field – since 2008, there have been almost 600 new childcare franchises and childcare in urban markets is expected to increase at a 5% clip. Additionally, the population of children under five is expected to grow by 50% from 2000 to 2050. These franchises provide after school child care for working parents while also offering education – early education programs for the youngest kids, with math and reading and other school subject skills for kids who are older but still too young to be left on their own.
In addition, franchises geared towards children extend further than the those which handle tutoring and teaching in traditional school subjects. Child care franchises include Primrose Schools and Rainbow Station. Arts based franchises are another avenue. Some franchises instruct children in subjects such as music or painting. Similar to the options in tutoring, some of these are home-based – the franchisee for, say, Virtuoso Music, manages the music instructors and match them up with students eager to learn.
Adult Educational Services
Educational franchises aren’t just for the young. Around 16 million Americans are enrolled in an educational and training services program. There are several types of franchises designed to teach or train adults. Occupational training is one area in the educational industry geared towards adults – helping professionals improve what they do. Franchises are available which help those in business – teaching salesmen better sales techniques (such as Sandler Training) or passing on business, organizational, and leadership skills (such as Crestcom)and there are franchises designed to teach financial planning, in general, not just for businesses but for home finance as well.
Driving schools are another adult option – the franchisee runs a school with driving instructors who teach defensive driving, license certification, and other driving programs. 911 Driving School is one of these. Other franchises are designed to teach recreational activities, such as dancing or culinary skills (Fred Astaire Dance Studio, Viva the Chef). This field of leisure education is a multi-billion dollar industry directed by individuals’ desires to learn new skills and abilities, but because of this, the potential downside to these businesses is that they tend to be more closely tied to personal income than other career or school related businesses which are seen as more necessary – which means that during times of economic downturn, there is a higher chance for them to suffer financially.
Vocational training is another aspect of the industry. Franchises can serve as jumping off points for people looking to enter new industries and learn about new careers. For example, there are franchises which will train and certify an individual to become a medical technician while also helping them find employment. There are also others to teach financial trading – stocks, options, futures and more.
The advantage of franchising in the educational services area is that the franchisee has access not only to the positive reputation and brand name enjoyed by these franchises, but also to time-tested educational systems. It allows franchisees to have a role in education without needing the qualifications or skills to be a teacher him or herself. In addition, working with a large company offers potential marketing advantages not available to a smaller company on its own. Purchasing an education franchise is a great way to succeed financially while also making a positive impact on the community.
Andrew Weber is an Analyst for FranchiseHelp.com and is a graduate of New York University and New York University School of Law.